Social Security is set for a new $300 billion hit

FORTUNE — Washington was consumed for months by the debate of how to “pay” for this year’s Social Security tax holiday, which cut the tax employees pay to 4.2% of their covered wages from the normal 6.2%.

But unnoticed amid the debate, Social Security’s finances have deteriorated badly over the past year, largely because of financial fallout from the Arab Spring. This deterioration—call it a total of about $300 billion for this year and the next four—will become obvious when the Social Security trustees release their annual update, probably in April. At that point, I suspect, people will begin pointing with alarm.

How can I be telling you this before the trustees report comes out? No, I didn’t get an early peek. No, I didn’t tap into the Social Security computer network (I can barely access my own network). Rather, I found some numbers buried deep in last month’s Congressional Budget Office semi-annual update that predicted a far bigger cash flow deficit for the Social Security system than the system’s trustees had predicted in their 2011 report, and tried to figure out what was going on.

Unlike many Washington numbers, the ones coming out of Social Security and CBO are both non-partisan and reliable. So what happened? After poking around, I came to realize that most—perhaps all—the difference between last year’s Social Security numbers and this year’s Congressional Budget Office numbers lay in the inflation adjustment that Social Security beneficiaries (including me) got for 2012.

Last spring, Social Security had projected that beneficiaries would get an increase of 0.7 of one percent. However, because of higher energy prices and other inflationary fallout touched off largely by Arab Spring, the adjustment was 3.6%. That increased what Social Security pays out, and didn’t add significantly—or perhaps not at all—to what it takes in. And before we proceed: I’m not judging Arab Spring and its aftermath. I’m just telling you the impact that it had on the Social Security system.

Anyone who truly understands Social Security knows that its real and growing problem is that the cash it’s taking in from taxes is falling behind what it pays to beneficiaries. Official Washington is obsessed with the size of the system’s trust fund—but that can be easily gamed by putting government IOUs of various sorts into the fund. Numerate Washington worries that an increasing cash flow deficit forces the government to borrow from investors to help cover Social Security’s outgo.

Here are the numbers—which don’t include any adverse impact from the 2011 and 2012 tax holidays, the cost of which is covered by payments from the Treasury.

Social Security had predicted a $46 billion cash shortfall for calendar 2011, very close to the $48 billion cash deficit that the CBO showed for fiscal 2011, which ended on Sept. 30. But CBO is predicting a $60 billion cash shortfall for fiscal 2012, compared with the $21 billion that Social Security predicted for 2012 last year. For 2013, the CBO projects $76 billion, compared with $19 billion for Social Security. For 2014 through 2016, the totals are $255 billion and $59 billion, respectively.

The five-year cash-deficit totals: $99 billion predicted by Social Security last year, $391 billion predicted by CBO this year. Even at a time that the government is borrowing more than $1 trillion annually from investors to pay its bills, these Social Security cash deficits are getting to be real money.

(A brief aside for the quants and nerds among us: My sources are Table D-3 in the January 2012 CBO update, and table VI.F7 in Social Security’s 2011 trustees report. Even though the CBO measures fiscal years and Social Security measures calendar years, the impact of the timing difference is minimal if you’re looking at a five-year period.)

If you add up the $200 billion or so of general revenues that are going to pay for the tax holiday (net of the amount “paid” by idiotically increasing fees on new mortgages issued by Fannie Mae and Freddie Mac), last year’s cash deficit and the projected 2012-2016 deficit, you’re looking at significantly more than $600 billion.

There are relatively simple, non-intrusive ways to fix Social Security’s long-term problems, provided that Washington—and the country—can summon up the will and the spirit of shared sacrifice to increase taxes going into the system, and slow the growth of the payments going out.

But as I’ve just shown you—and as you’ll see officially when the Social Security trustees report come out—time is getting short.

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